Alphabet Inc. Class C
GOOG · NASDAQ-GS
Next quarter
Expected to report Feb 3, 2027 — estimated from last year’s reporting date.
Consensus is $3.11 EPS for Dec 2026 across 13 estimates, ranging $2.70 to $3.34.
GOOG Sep 2026
- 27.89%
- -12.29%
- $2.94
- $2.12
- —
- $127.58B
Reported results
- $127.58B
- 59.70%
- $40.58B
- 31.81%
- $26.47B
- $2.12
Highlights
- EPS miss: Diluted EPS was $2.12, 27.9% below the $2.94 consensus and down from $2.87 a year earlier; a $8.7 billion loss on equity securities helped drive the decline.
- Cloud acceleration: Google Cloud revenue more than doubled to $30.7 billion, up 103% year over year, while segment operating income rose to $11.1 billion from $3.6 billion.
- Search strength: Google Search & other revenue grew 12% to $63.4 billion; paid clicks rose 8% and cost per click increased 4%. Management said query growth was the highest in five years.
- Consolidated growth: Revenue increased 25% to $127.6 billion, the 13th consecutive quarter of double-digit growth; operating income rose 30% to $40.6 billion and operating margin expanded to 31.8% from 30.5%.
- Investment-driven earnings volatility: Other income swung from a $12.8 billion gain in Q3 2025 to an $8.2 billion expense, including $8.7 billion of net equity-security losses; the company said these losses reduced diluted EPS by $0.55.
- AI product reach: The Gemini app reached 1 billion users, and first-party model APIs processed nearly 32 billion tokens per minute, more than four times the year-ago level. YouTube Music and Premium subscribers exceeded 150 million, including trials.
- Capex and cash generation: Operating cash flow was $42.3 billion against $51.4 billion of capital expenditures, leaving free cash flow at negative $9.1 billion, versus negative $5.9 billion in Q2.
- Cloud visibility: Remaining performance obligations were $567.7 billion, including $560.8 billion for Google Cloud; Alphabet expects just over 55% to be recognized over the next 24 months.
Analysis
Alphabet’s Q3 was a strong operating quarter obscured at the EPS line by investment-mark volatility. Revenue rose 25% year over year to $127.6 billion, extending the company’s streak of double-digit growth to 13 quarters, while operating income climbed 30% to $40.6 billion and margin widened to 31.8%. Yet diluted EPS of $2.12 missed the $2.94 consensus by 27.9% and fell 26% from $2.87 a year ago. The principal drag was other income, which moved from a $12.8 billion gain to an $8.2 billion expense, including an $8.7 billion net loss on equity securities. Net income available to common stockholders was $26.2 billion, down from $35.0 billion a year earlier.
Cloud was the standout growth and profit driver: revenue more than doubled to $30.7 billion and operating income reached $11.1 billion. Search also strengthened, with revenue up 12% and query growth at a five-year high, according to management. Sequentially, revenue rose 6.5% from Q2’s $119.8 billion, but operating income was nearly flat at $40.6 billion versus $40.8 billion; EPS fell from $9.11, a comparison distorted by Q2’s unusually large investment gains. Meanwhile, investment in capacity intensified: $51.4 billion of capex exceeded operating cash flow, producing negative $9.1 billion of quarterly free cash flow.
Investment-mark earnings volatility
The gap between operating progress and reported earnings largely reflects swings in investment valuations rather than a deterioration in the core operating result. Other income and expense moved by $21.0 billion year over year, from income of $12.8 billion to expense of $8.2 billion. The filing attributes the quarter’s equity-security loss chiefly to marketable holdings, including SpaceX, alongside lower gains on non-marketable investments.
- EPS impact: The $8.7 billion net loss on equity securities reduced net income by $6.7 billion and diluted EPS by $0.55 after tax.
- Underlying comparison: Operating income increased 30% year over year, but common-stockholder net income fell to $26.2 billion from $35.0 billion and diluted EPS declined to $2.12 from $2.87.
- Quarter-on-quarter context: Q2 net income of $112.2 billion and EPS of $9.11 included unusually large investment gains; Q3’s lower figures should be read against that volatile base as well as the year-ago comparison.
Google Cloud
Cloud was the quarter’s clearest growth engine, with revenue of $30.7 billion, up 103% year over year and 6% sequentially. Alphabet cited demand for AI infrastructure and enterprise AI solutions, growth in core GCP services, and TPU system sales. The segment’s operating leverage was substantial: operating income rose to $11.1 billion from $3.6 billion, even as infrastructure usage and TPU-related costs increased.
- Profitability: Operating margin was approximately 36% of revenue, compared with approximately 24% a year earlier.
- Backlog: Google Cloud accounted for $560.8 billion of Alphabet’s $567.7 billion revenue backlog; just over 55% of total backlog is expected to be recognized in the next 24 months.
- Qualification: Backlog includes $16.8 billion related to a multi-year agreement with Crux AI, an unconsolidated joint venture and related party.
Search and Services
Google Services revenue rose 11% to $96.3 billion, with Search providing most of the growth. Search & other reached $63.4 billion, up 12%; management connected growth to more queries, greater advertiser spending, and improvements in ad formats and delivery. YouTube ads grew more modestly, while subscriptions, platforms, and devices continued to benefit from paid subscriptions and Pixel sales.
- Search monetization: Paid clicks increased 8% and cost per click rose 4%, contributing to the 12% increase in Search & other revenue. Management said year-over-year query growth, including commercial queries, was the highest in five years.
- Other Services lines: YouTube ad revenue increased 9% to $11.2 billion; Google Network revenue was roughly flat at $7.5 billion; subscriptions, platforms, and devices rose 11% to $14.3 billion.
- Network metrics: Impressions declined 14%, while cost per impression increased 14%, leaving revenue approximately level year over year.
- Consumer usage: The Gemini app reached 1 billion users, and YouTube Music and Premium passed 150 million subscribers globally, including trials.
AI infrastructure investment
The growth opportunity is being met with a step-up in infrastructure spending and associated commitments. Third-quarter capital expenditures were $51.4 billion, more than double the $24.0 billion a year earlier, primarily for technical infrastructure. Operating cash flow of $42.3 billion therefore did not cover capex, and free cash flow was negative $9.1 billion, compared with negative $5.9 billion in Q2 and positive $10.1 billion in Q1. Trailing-12-month free cash flow remained positive at $19.7 billion.
- Capacity build-out: Property and equipment purchases totaled $132.0 billion for the first nine months of 2026, versus $63.6 billion in the comparable 2025 period.
- Long-dated obligations: Alphabet disclosed $130.5 billion of future lease payments for leases not yet commenced, primarily for data centers and energy infrastructure.
- Commercial commitments: Total material purchase commitments were $924.4 billion, including $802.1 billion of multi-year technical-infrastructure, inventory, energy, and content commitments; $213.4 billion was due within 12 months.
Services costs and margins
Alphabet’s operating margin improved despite higher infrastructure and compensation costs, though spending growth was significant. Cost of revenue increased 24% to $51.4 billion, broadly in line with revenue growth; operating expenses rose 20% to $35.6 billion. Research and development expense increased 36% to $20.6 billion, reflecting higher employee compensation and depreciation, while general and administrative expense fell 17% to $6.1 billion, largely because the prior-year quarter included a $3.5 billion European Commission fine.
- Google Services profit: Segment operating income rose 17% to $39.2 billion, on revenue growth and lower legal-related expenses, partly offset by higher traffic acquisition costs.
- Alphabet-level spending: Unallocated activities, primarily shared AI research and development, increased to $7.7 billion of expense from $4.5 billion a year earlier.
- Other Bets: Revenue was $372 million, while the operating loss widened to $2.0 billion from $1.4 billion.
